Miller Tabak analyst Brendan Furlong reportedly cut Altera (ALTR) to Sell from Neutral, citing an expected slowdown in the programmable logic device (PLD) market and trimming estimates for Altera and Xilinx (XLNX). Altera’s own 2011 filings provide useful context—including strong first-quarter sales growth and substantial exposure to telecom and wireless—but do not establish whether the analyst’s forward-looking call was right.
Why did Miller Tabak downgrade Altera?
Embedded.com reported that Furlong lowered Altera to Sell from Neutral and reduced estimates for both Altera and Xilinx because he expected the PLD market to slow. That is the reported rationale; the underlying Miller Tabak note is not available in the cited account.
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The report does not state the call’s date, a price target, or how much either estimate changed. Those details cannot be inferred from the rating change or its short explanation.
What did Altera say about the 2011 PLD market?
In its 2011 Form 10-K, Altera described PLDs as standard semiconductor chips that customers program to perform logic functions. Its PLD products were field-programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs); its broader portfolio also included HardCopy ASIC devices, IP cores, and development software.
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- Market size: Altera estimated the 2011 PLD market at approximately $4.9 billion, using publicly available information and data it attributed in part to Gartner Dataquest. This was Altera’s estimate, not a Gartner-published market figure.
- Product mix: Altera estimated FPGAs accounted for approximately 81% of total PLD sales.
- Altera sales mix: PLDs represented 91% of Altera’s 2011 net sales—approximately 81% from FPGAs and 10% from CPLDs.
Altera also described a much larger possible opportunity: it estimated that an addressable portion of the combined ASIC and application-specific standard product (ASSP) market was $48 billion. The company cautioned that the entire ASIC and ASSP market was not available for PLD displacement, and that customer adoption could be slowed by technical concerns such as power, performance, or design methodology. The figure therefore describes management’s view of an opportunity, not established demand.
How did reported sales compare with the slowdown concern?
For the quarter ended April 1, 2011, Altera reported net sales of $535.8 million, up 33% from the comparable quarter in 2010. The company said growth was broad-based and primarily driven by new products.
That result is a useful snapshot of recent performance, but it does not resolve a forecast about future market growth. Quarterly results and an analyst’s expectations can differ because they cover different periods; the Embedded.com account does not provide Furlong’s detailed forecasts or timing assumptions.
What business risks shaped Altera’s exposure?
Telecom and wireless demand
Customers participating in telecom and wireless represented approximately 43% of Altera’s 2011 net sales, according to its filing. That concentration made results exposed to changes in demand in those markets.
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Long product adoption cycles
Altera said the interval from a product design-in to volume production could range from six months to three years or more. Customer program timing, cancellations, end-market demand, and shipping schedules could all affect when a design win translated into revenue. As a result, market expectations and reported company sales might not move in lockstep.
Competition across multiple factors
Altera identified Xilinx, Lattice Semiconductor, Microsemi, and other semiconductor vendors as competitors. Its filing listed performance, power, features, software and IP capabilities, pricing, availability, reliability, support, manufacturing competence, and customer familiarity with an incumbent product among the factors influencing competition.
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What can—and cannot—be concluded from the report?
The documented call is a historical analyst downgrade based on an expected PLD-market slowdown. Altera’s filing supplies company estimates for market size and mix, while its quarterly filing records strong year-over-year sales growth for one period. Neither the market-size estimate nor that single quarter independently validates or disproves the analyst’s outlook.
For investors reviewing the episode, the distinction matters: the rating rationale is a reporter’s summary of Furlong’s view, company figures are Altera’s own disclosures, and the available account does not show the numerical revisions or fuller analysis behind the call. This historical report is not current investment advice.
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Sources: Embedded.com’s report; Altera’s 2011 Form 10-K and quarterly filing for the period ended April 1, 2011.
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